1244 Stock

Why would you want your company or any other company you may invest in to treat the company stock as "Section 1244 stock"? If you establish your stock as 1244 stock in your Corporation then if things do go wrong and your company suffers a financial set-back you will be allowed to deduct up to $50,000 in a single year ($100,000 for joint filers) against your ordinary income. This applies to all the classes of stock that a company may have (common, preferred, restricted etc.)

This is different then the normal deduction that you are allowed on a loss on stock for your tax return. Normally you are only allowed to deduct the loss against you capital gains and up to $3,000 against your ordinary income in a year. As you can see this could be very advantageous when filing your tax return.

To qualify as 1244 stock you must meet the following criteria:
1. You have to invested cash for the stock. You cannot trade property, stocks, securities etc.
2. The corporation can not receive over $1,000,000 in contributions or paid in capital
3. The corporation has to receive over 1/2 of its income from sources other then; royalties, annuities, sales or exchanges of securities, interest rents or dividends